Malaysia's Prime Minister Mahathir Mohamad doesn't give up easily.
During three days in February, he trundled through three Southeast Asian
capitals peddling his latest proposal for an Asian solution to Asia's
economic turmoil. The idea: Reduce dependence on the American dollar by
trading goods in regional currencies.
Mahathir's suggestion picked up support in Bangkok and Manila,
but
many economists questioned its validity. The latest brainwave follows an
earlier proposal backed by the Malaysian prime minister to set up an
Asia fund to rescue the region's struggling economies without relying on
the International Monetary Fund. That idea never took off.
More than seven months after the Asian economic volcano erupted, the
Association of Southeast Asian Nations hasn't found a formula for
tackling the crisis. Although Asean leaders are talking more than ever
before, concrete measures to shore up the region's economies are coming
instead from institutions such as the IMF and countries such as the
United States.
The goal of Mahathir's regional trade plan is to reduce the
demand
for U.S. dollars and he local currencies retain their value. Precisely
how the mechanism would work hasn't been spelled out. One idea would be
for an importer to pay for a neighbour's products in the exporter's
native currency. Another option would be to use the Singapore dollar --
rather than the greenback -- as the peg.
Economists say using Asean currencies might make sense if trade
within Asean was booming. But intra-Asean trade reached only 22.8% of
the total $170.6 billion traded by Asean states in 1996. Nor would a
Singapore-dollar peg have much mitigated the effect of the current
crisis: The currencies of Indonesia, Malaysia, Thailand and the
Philippines have plunged almost as far against the Singapore dollar as
against the American currency.
What's more, Indonesia has announced that it will implement
a
currency-board system that would effectively peg the rupiah to the U.S.
dollar. That would immediately undermine any Asean effort to rally
around the Singapore dollar.
Asean may have failed to come up with solutions, but the grouping's
leaders have been busy conferring. In recent weeks, Mahathir has
shuttled between Jakarta, Bangkok, Singapore and Manila, while Singapore
Prime Minister Goh Chok Tong has consulted with Indonesian President
Suharto three times. "There is much more direct communication between
Asean leaders," observes Panitan Wattanayagorn, a security-affairs
adviser to Thai Premier Chuan Leekpai.
More frequent contact is improving relations among Asean leaders,
but
they've been unable to find a quick fix to halt the economic meltown.
And different countries have proposed different formulas for tackling
the troubles.
Mahathir, who has picked up Suharto's mantle as de facto leader
of
Asean since Indonesia slumped into an economic crisis, has tried to
mobilize regional cooperation. It's not the first time: A few years ago,
he proposed an East Asia Economic Caucus to bypass the U.S.-dominated
Asia-Pacific Economic Cooperation grouping, but the idea never took off
due to Japan's reluctance to endorse it and stiff opposition from the
U.S.
So will others buy his latest scheme? Analysts are sceptical.
"Mahathir represents the wild card in the region -- he makes other Asean
countries cautious," says Bruce Gale of Political and Economic Risk
Consultancy in Singapore. "When his proposals go against the Americans,
others take him with a grain of salt. The Americans are the only ones
who can bail out the region."
Take the case of Singapore. Like Malaysia, the republic has
a great
deal to fear from economic turmoil in Indonesia, which could translate
into the flight of thousands of ethnic Chinese. It has mounted a
diplomatic offensive of its own to keep its neighbour from slipping into
chaos. But Singapore's proposals are very different from Malaysia's
regional approach. The city-state's suggestions are largely in line with
those from the West and the IMF.
As the country with the healthiest economy in the region, the
predominantly Chinese island squeezed between large Muslim neighbours
faces a tricky task. In October, Singapore offered Indonesia a $5
billion credit line, but officials took pains to clarify that the aid
came as part of the IMF's loan package for the country.
In early February, Goh proposed a multilateral loan-guarantee
scheme
to he Indonesian exporters restart their businesses. If the plan
flies, most of the money (up to $20 billion) would come from the West
and Japan.
Could Singapore's adherence to IMF prescriptions cause friction
within Asean? The answer depends on whether the medicine works.
Singapore risks being "identified with adverse external pressures should
the programme generate domestic social and political difficulties down
the track," notes political scientist Garry Rodan of Australia's Murdoch
University.
"However, should a significant transformation of political structures
unfold . . . the possibility of a new and closer relationship with
Indonesia's economic reformers is opened up."
Gale of Political and Economic Risk Consultancy believes the
economic
turbulence will force the regional grouping, whose founding principles
include noninterference in one another's domestic affairs, to undergo a
facelift. "It's a big jump for Asean," Gale says of the currency crisis.
"Now they realize they have to be involved in each other's affairs."